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Exhibit 11-7 Aggregate Demand and Supply Model Beginning at Equilibrium

Question 115

Multiple Choice

Exhibit 11-7 Aggregate demand and supply model Exhibit 11-7 Aggregate demand and supply model Beginning at equilibrium E<sub>1</sub> in Exhibit 11-7, suppose the marginal propensity to consume (MPC) is 0.75, and the government wishes to lower the price level form 170 to 150 while maintaining a balanced budget. The government should reduce both spending and taxes by: A) $20 billion. B) $100 billion. C) $133 billion. D) $400 billion. Beginning at equilibrium E1 in Exhibit 11-7, suppose the marginal propensity to consume (MPC) is 0.75, and the government wishes to lower the price level form 170 to 150 while maintaining a balanced budget. The government should reduce both spending and taxes by:


A) $20 billion.
B) $100 billion.
C) $133 billion.
D) $400 billion.

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